In 2010, the debate over valuation of the Renminbi is again heating up and the Chinese currency has returned to appreciating against the dollar But is the Renminbi undervalued？ Drawing on the Balassa-Samuelson （B-S...In 2010, the debate over valuation of the Renminbi is again heating up and the Chinese currency has returned to appreciating against the dollar But is the Renminbi undervalued？ Drawing on the Balassa-Samuelson （B-S） effect on purchasing power parity, we conduct theoretical and empirical analyses of this issue. Theoretical analysis proves that a country＇s real exchange rate will appreciate with rising income, but the currencies of low-income countries tend to be undervalued. In order to avoid biased conclusions resulting from a single dataset or sampling method, we draw on three major publicly-available datasets to examine the B-S effect across 144 economies. Our results indicate that the degree of Renminbi misvaluation is highly dependent on the data source. Synthesizing analyses of diverse datasets, we estimate that the Renminbi was only undervalued by less than 8per cent in 2009. We conclude that China＇s external imbalance most probably results from deep-seated structural imbalances rather than Renminbi undervaluation.展开更多
The use of renminbi for invoicing and settlement intermediaries in foreign-oriented activities is the first step and footstone of internationalization of the Chinese currency. With the appreciation of renminbi in rece...The use of renminbi for invoicing and settlement intermediaries in foreign-oriented activities is the first step and footstone of internationalization of the Chinese currency. With the appreciation of renminbi in recent years, there has been a growth of renminbi invoicing and settlement in China’s border trades, although the overall amount is small and the development momentum is imbalanced among different regions. The main obstacles come from such factors as VAT rebate policy restrictions and foreign exchange control, insufficient financial services, and under-cultivated willingness among enterprises. Looking from the strategic perspective of strengthening macro-adjustment and enhancing the open economy, it is pressing and would be beneficial to China to promote the renminbi’s invoicing and settlement function. Therefore, following the momentum, we should accelerate the construction of a cross-border renminbi clearing system, create non-discriminative treatment in terms of VAT rebate and exchange control policies, and gradually expand the usage of the renminbi from border trades to general trades and outward investment.展开更多
Internationalization of the renminbi is the only option for China to fully integrate into the global economic and financial systems. It is not only necessary but imperative as well. With the discussion of advancing re...Internationalization of the renminbi is the only option for China to fully integrate into the global economic and financial systems. It is not only necessary but imperative as well. With the discussion of advancing renminbi internationalization, benef its and costs must be addressed. We need to closely monitor possible risks and bring out the benefits while averting disadvantages. The overall strategy is to consolidate the groundwork and at the same time actively advance renminbi internationalization and opt for a "three-step" strategy at both strategic and policy levels. To overcome the constraints standing in the way of renminbi internationalization, the basic goals should be: to enhance the readiness of renminbi internationalization, dialectically assess the preconditions, and increase the currency's international circulation as a way to achieve major progress in renminbi internationalization.展开更多
The recent global financial crisis has revealed great defects in the US dollar dominated international monetary system.In response,countries and international organizations have developed numerous proposals for reform...The recent global financial crisis has revealed great defects in the US dollar dominated international monetary system.In response,countries and international organizations have developed numerous proposals for reform of the system.With China's growing economic presence,the renminbi is gaining recognition and acceptance in international markets and is slowly beginning to play a significant role in trade settlement and offshore market development.Meanwhile,it is important to remain aware of the limitations of renminbi internationalization and the gaps that exist between it and other major world currencies.Once fully implemented,renminbi internationalization will result in it becoming a major currency on the world stage in approximately 15 years.展开更多
The special drawing rights(SDR) must have stability and representation in order to serve as reserve assets and the unit of account for bulk commodities and assume the function as a potential international currency. By...The special drawing rights(SDR) must have stability and representation in order to serve as reserve assets and the unit of account for bulk commodities and assume the function as a potential international currency. By introducing such factors as China's share in global trade volume in 2013, this paper found that the covariance between the SDR and the price fluctuations of major commodities is the smallest after Renminbi inclusion into the SDR. The covariance is more or less halved compared with the SDR without Renminbi. Then, based on our comparison of volatility in the effective exchange rates(EER) of various countries(extensively used) and the volatility in the SDR exchange rate(seldom used), we found that despite similar trend curves, the SDR's volatility can explain for a very small part of the volatility in effective exchange rate. The residual error indicates that the share of SDR is limited in the volatility of effective exchange rates of various countries on the one hand and suggests that it is urgent to expand the SDR to include representative currencies, particularly the currencies that represent significant weights of world trade. Relevant tests demonstrate that Renminbi inclusion into the SDR will not only enlarge the stability of SDR but enlarge its function as an index currency through the extension of SDR's function as the unit of account for major world commodities and the inclusion of the currencies of other major trading nations, so that the representation as the global unit of account will be enlarged. In addition, the inclusion into the SDR also helps Renminbi become a component of the international reserve currencies and supplement its liquidity supply.展开更多
Exchange rate functions under systems of centrallyplanned economy and market economy are quite different,and the mechanism to determine such exchange rate is alsodifferent. To adopt a socialist market economic system ...Exchange rate functions under systems of centrallyplanned economy and market economy are quite different,and the mechanism to determine such exchange rate is alsodifferent. To adopt a socialist market economic system inChina, the exchange rate mechanism of Renminbi must bethoroughly transformed. To accomplish this goal, I believethere are three problems that must be solved: first,展开更多
This paper investigates the stability of the international monetary system using the new open economic analysis framework. Our research has discovered that conditions for the stability of the international monetary sy...This paper investigates the stability of the international monetary system using the new open economic analysis framework. Our research has discovered that conditions for the stability of the international monetary system are such that the economic volume of reserve currency countries must be large enough and that the solvency capacity growth rate of reserve currency countries should be no lower than the real output growth rate of non- reserve currency countries and the real return of the reserve currency,＂ the existence of the valuation effect cannot secure the stability of a reserve currency,＂ and inclusion of the euro and the Japanese yen into international reserve currencies cannot stabilize the international monetary system, while Renminbi internationalization plays an irreplaceable role to the stability of the international monetary system.展开更多
This paper uses the input-output tables from 2007 to estimate the exchangerate risk exposure of all 42 sectors of the Chinese economy. It then demonstrates a new quantitative approach for examining the differential im...This paper uses the input-output tables from 2007 to estimate the exchangerate risk exposure of all 42 sectors of the Chinese economy. It then demonstrates a new quantitative approach for examining the differential impacts of Renminbi appreciation on the export of finished goods and the import of intermediate inputs in each sector, and estimates the changes in profitability of each sector under different degrees of Renminbi appreciation. The results indicate that appreciation of the Renminbi will increase the profitability of 22 sectors, which are generally monopolistic, capital-intensive, and reliant on R＆D, and reduce the profitability of 20 sectors, which are generally competitive, labor-intensive, and less reliant on R＆D. This suggests that the degree and pace of Renminbi appreciation must be coordinated with industrial and employment policies in order to reduce exchange-rate risk exposure through trade restructuring, to improve economic structure, to promote competition and employment, and to maintain steady and sustainable economic growth.展开更多
The current global financial crisis's severity is rarely seen once in a century. Due to a lack of liquidity-attracting new industries, the economic adjustment might be prolonged; and the multiplier effects of inte...The current global financial crisis's severity is rarely seen once in a century. Due to a lack of liquidity-attracting new industries, the economic adjustment might be prolonged; and the multiplier effects of international finance and international trade call for joint rescue plans on a global basis. China's recent price adjustment has proven a failure and its domestic consumption-stimulating policy is ineffective. Investments and exports remain the growth engine for China's economy. So the country should make efforts to maintain export competitiveness with output adjustment, restoration of interest rate parity and reduction of the tax rate parity. Internationalization of the U.S. dollar-permeated renminbi is not a sensible choice, as the renminbi is not, in essence, an international currency, and it lacks a micro-foundation.展开更多
Most of the economists agree that renminbi is undervalued, while as for how much it should be appreciated, substantial disagreements exists. At the beginning of this year, analysts abroad tended to think that the renm...Most of the economists agree that renminbi is undervalued, while as for how much it should be appreciated, substantial disagreements exists. At the beginning of this year, analysts abroad tended to think that the renminbi should increase its value by 10% to 15%. The most recent estimates are that the renminbi should appreciate 20% to 30%. This shows the great upward pressure on the renminbi. Since it was devalued in 1994, China’s currency has been kept at a constant nominal level to the US dollar despite china’s rapid economic growth, rising productivity, strong exports, and massive foreign direct investments——all factors that normally cause a currency to appreciated, moreover, the resulting build-up of central bank foreign reserves in itself is sufficient to justify renminbi appreciation. The reasons for keeping Renminbi stable is discussed in this paper.展开更多
A global renminbi(RMB)needs to be backed by a large,deep and liquid RMB market with a world-class Chinese government bond(CGB)market as its core.It also needs the support from a bigger and more open domestic stock mar...A global renminbi(RMB)needs to be backed by a large,deep and liquid RMB market with a world-class Chinese government bond(CGB)market as its core.It also needs the support from a bigger and more open domestic stock market.China’s CGB market is the sixth largest local currency sovereign bond market in the world.By transforming the non-tradable,captive central bank liabilities into homogeneous and tradable CGBs through cutting the still high Chinese reserve requirements by 1/3,the size of the CGB market can rise by 40%,boosting market liquidity while trimming distortions to the banking system.Also,policy bank bonds may attract foreign investor demand.Finally,a bigger and more open domestic A-share stock market also helps expand the RMB assets in the international investor portfolio.With both bigger bond and stock markets and their higher foreign ownerships following market opening,the combined sum of Chinese domestic bonds and A-shares held by foreign investors may increase five folds during 2018–2025,lifting the RMB asset position in global investor portfolios,facilitating a potential global RMB,while promoting a deeper and more efficient Chinese domestic capital market.This process of liberalising cross-border portfolio capital flows for non-resident investors may bring both risks and benefits to the Chinese economy.展开更多
This paper is a tentative endeavor to delineate the potential of the renminbi to become a global currency. It first analyzes the critical economic, financial and policy attributes that are required to support a curren...This paper is a tentative endeavor to delineate the potential of the renminbi to become a global currency. It first analyzes the critical economic, financial and policy attributes that are required to support a currency to gain an international role. It then examines whether China has the potential to acquire these attributes. The paper concludes by offering some provisional observations on the implications for Asia and the global economy, should the renminbi evolve into a world currency in the coming decades.展开更多
This study reviews the developments in markets. The onshore market has seen a the onshore and offshore renminbi derivatives rapid build-up in the market infrastructure and price discovery mechanism in the past year, ...This study reviews the developments in markets. The onshore market has seen a the onshore and offshore renminbi derivatives rapid build-up in the market infrastructure and price discovery mechanism in the past year, with empirical evidence suggesting that its pricing is increasingly determined by financial fundamentals, such as the covered interest rate parity. However, the growth of the market has been restrained by restrictions on the participant base, limited variations in the RMB/US$ exchange rate, market participants＇ lack of technical capacity and experience, and inadequate supporting financial market infrastructure. The non-deliverable forward （NDF） market, concentrated in Hong Kong and Singapore, is more developed, but has the drawback that its pricing is not tied to financial fundamentals. The comparison between onshore and offshore markets suggests that two issues are of particular importance for future derivatives market development in China： the balance between regulation and development, and the relationship between onshore and offshore markets.展开更多
Most studies of renminbi internationalization focus on the supply side, by examining China＇s own economic and political conditions. In contrast, this study addresses the demand side of renminbi internationah＇zation,...Most studies of renminbi internationalization focus on the supply side, by examining China＇s own economic and political conditions. In contrast, this study addresses the demand side of renminbi internationah＇zation, by providing an in-depth analysis of renminbi use in ordinary foreign economies from both economic and political perspectives, with a particular focus on South Korea, China＇s next-door neighbor. The study finds that sustainable indigenous market forces facilitating renminbi use in South Korea remain weak, despite the country＇s close economic ties with China. This research also shows, however, that the Korean Government has itself recently been able, through its policy measures, to generate new domestic support for greater use of the renminbi. These findings ultimately highlight the significant impact on the internationalization of a currency of the politics in the foreign countries using it.展开更多
Since the financial crisis hit in 2007, the US dollar privilege has not only become ＂exorbitant＂ but ＂extortianate. ＂ Countries such as China are no longer willing to allow the USA to exercise this extortionate be...Since the financial crisis hit in 2007, the US dollar privilege has not only become ＂exorbitant＂ but ＂extortianate. ＂ Countries such as China are no longer willing to allow the USA to exercise this extortionate behavior. The potential geopolitical implications of a US dollar decline are immense. The USA would lose its privileged seigniorage position and with that the ability to achieve permanently higher returns on foreign assets than the returns paid to foreigners who invest in the USA. The global economy is already close to operating with three regional exchange rate anchors： the US dollar; the euro; and, increasingly, the renminbi. Hence, the transition to a tripolar system could occur sooner than many assert. Nevertheless, given the importance of financial deepening and integration in the internationalization of currencies, any shift will still be gradual.展开更多
This paper studies the ongoing diffusion of renminbi (RMB) trading across the globe, the first of such research of an international currency. It analyses the distribution in offshore RMB trading in 2013 and 2016 using...This paper studies the ongoing diffusion of renminbi (RMB) trading across the globe, the first of such research of an international currency. It analyses the distribution in offshore RMB trading in 2013 and 2016 using comprehensive data from the Triennial Central Bank Survey of foreign exchange markets. In 2013, Asian centers favored by the policy of RMB internationalization had disproportionate shares in global RMB trading. Over the following three years, RMB trading seemed to converge to the spatial pattern of all currencies, with a half-life of seven to eight years. The previously most traded emerging market currency, the Mexican peso, shows a similar pattern, although it is converging to the global norm more slowly. Three other emerging market currencies show a qualitatively similar evolution in the geography of their offshore trading. Overall, the RMB's internationalization is tracing an arc from the influence of administrative measures to the working of market forces.展开更多
In the present paper we explore the internationalization of the renminbi with reference to the experiences of other monetary powers, and discuss its determinants, prospects and implications for China＇s development in...In the present paper we explore the internationalization of the renminbi with reference to the experiences of other monetary powers, and discuss its determinants, prospects and implications for China＇s development in the ＂new normal. ＂ Specifically, after summarizing the major progress made thus far, we conduct a regression analysis, showing that economic size and financial conditions are significant determinants of the international currency status, while inertia and other unobserved factors also play important roles. These empirical findings enable us to undertake a scenario analysis focusing on the renminbi＇s potential to become a global reserve currency. Based on this quantitative research, we then revisit China＇s policy initiatives designed to promote its currency overseas. In our view, the internationalization of the renminbi, along with financial deepening and liberalization, should be regarded as a means to achieve China ＇s goal of reaching a more sustainable and balanced model of development.展开更多
文摘In 2010, the debate over valuation of the Renminbi is again heating up and the Chinese currency has returned to appreciating against the dollar But is the Renminbi undervalued？ Drawing on the Balassa-Samuelson （B-S） effect on purchasing power parity, we conduct theoretical and empirical analyses of this issue. Theoretical analysis proves that a country＇s real exchange rate will appreciate with rising income, but the currencies of low-income countries tend to be undervalued. In order to avoid biased conclusions resulting from a single dataset or sampling method, we draw on three major publicly-available datasets to examine the B-S effect across 144 economies. Our results indicate that the degree of Renminbi misvaluation is highly dependent on the data source. Synthesizing analyses of diverse datasets, we estimate that the Renminbi was only undervalued by less than 8per cent in 2009. We conclude that China＇s external imbalance most probably results from deep-seated structural imbalances rather than Renminbi undervaluation.
文摘The use of renminbi for invoicing and settlement intermediaries in foreign-oriented activities is the first step and footstone of internationalization of the Chinese currency. With the appreciation of renminbi in recent years, there has been a growth of renminbi invoicing and settlement in China’s border trades, although the overall amount is small and the development momentum is imbalanced among different regions. The main obstacles come from such factors as VAT rebate policy restrictions and foreign exchange control, insufficient financial services, and under-cultivated willingness among enterprises. Looking from the strategic perspective of strengthening macro-adjustment and enhancing the open economy, it is pressing and would be beneficial to China to promote the renminbi’s invoicing and settlement function. Therefore, following the momentum, we should accelerate the construction of a cross-border renminbi clearing system, create non-discriminative treatment in terms of VAT rebate and exchange control policies, and gradually expand the usage of the renminbi from border trades to general trades and outward investment.
文摘Internationalization of the renminbi is the only option for China to fully integrate into the global economic and financial systems. It is not only necessary but imperative as well. With the discussion of advancing renminbi internationalization, benef its and costs must be addressed. We need to closely monitor possible risks and bring out the benefits while averting disadvantages. The overall strategy is to consolidate the groundwork and at the same time actively advance renminbi internationalization and opt for a "three-step" strategy at both strategic and policy levels. To overcome the constraints standing in the way of renminbi internationalization, the basic goals should be: to enhance the readiness of renminbi internationalization, dialectically assess the preconditions, and increase the currency's international circulation as a way to achieve major progress in renminbi internationalization.
基金National Social Sciences Foundation(Approval No.10ZD&054)China Postdoctoral Science Foundation(Approval No.2012T50193)Beijing Higher Education Young Elite Teacher Project(Approval No.YETP0226)
文摘The recent global financial crisis has revealed great defects in the US dollar dominated international monetary system.In response,countries and international organizations have developed numerous proposals for reform of the system.With China's growing economic presence,the renminbi is gaining recognition and acceptance in international markets and is slowly beginning to play a significant role in trade settlement and offshore market development.Meanwhile,it is important to remain aware of the limitations of renminbi internationalization and the gaps that exist between it and other major world currencies.Once fully implemented,renminbi internationalization will result in it becoming a major currency on the world stage in approximately 15 years.
文摘The special drawing rights(SDR) must have stability and representation in order to serve as reserve assets and the unit of account for bulk commodities and assume the function as a potential international currency. By introducing such factors as China's share in global trade volume in 2013, this paper found that the covariance between the SDR and the price fluctuations of major commodities is the smallest after Renminbi inclusion into the SDR. The covariance is more or less halved compared with the SDR without Renminbi. Then, based on our comparison of volatility in the effective exchange rates(EER) of various countries(extensively used) and the volatility in the SDR exchange rate(seldom used), we found that despite similar trend curves, the SDR's volatility can explain for a very small part of the volatility in effective exchange rate. The residual error indicates that the share of SDR is limited in the volatility of effective exchange rates of various countries on the one hand and suggests that it is urgent to expand the SDR to include representative currencies, particularly the currencies that represent significant weights of world trade. Relevant tests demonstrate that Renminbi inclusion into the SDR will not only enlarge the stability of SDR but enlarge its function as an index currency through the extension of SDR's function as the unit of account for major world commodities and the inclusion of the currencies of other major trading nations, so that the representation as the global unit of account will be enlarged. In addition, the inclusion into the SDR also helps Renminbi become a component of the international reserve currencies and supplement its liquidity supply.
文摘Exchange rate functions under systems of centrallyplanned economy and market economy are quite different,and the mechanism to determine such exchange rate is alsodifferent. To adopt a socialist market economic system inChina, the exchange rate mechanism of Renminbi must bethoroughly transformed. To accomplish this goal, I believethere are three problems that must be solved: first,
基金the research program Renminbi Internationalization and Adjustment of Internal and External Imbalances of China’s Economy(NKZXB1222)supported by the Special Fund of Fundamental Scientific Research of Central Universities
文摘This paper investigates the stability of the international monetary system using the new open economic analysis framework. Our research has discovered that conditions for the stability of the international monetary system are such that the economic volume of reserve currency countries must be large enough and that the solvency capacity growth rate of reserve currency countries should be no lower than the real output growth rate of non- reserve currency countries and the real return of the reserve currency,＂ the existence of the valuation effect cannot secure the stability of a reserve currency,＂ and inclusion of the euro and the Japanese yen into international reserve currencies cannot stabilize the international monetary system, while Renminbi internationalization plays an irreplaceable role to the stability of the international monetary system.
文摘This paper uses the input-output tables from 2007 to estimate the exchangerate risk exposure of all 42 sectors of the Chinese economy. It then demonstrates a new quantitative approach for examining the differential impacts of Renminbi appreciation on the export of finished goods and the import of intermediate inputs in each sector, and estimates the changes in profitability of each sector under different degrees of Renminbi appreciation. The results indicate that appreciation of the Renminbi will increase the profitability of 22 sectors, which are generally monopolistic, capital-intensive, and reliant on R＆D, and reduce the profitability of 20 sectors, which are generally competitive, labor-intensive, and less reliant on R＆D. This suggests that the degree and pace of Renminbi appreciation must be coordinated with industrial and employment policies in order to reduce exchange-rate risk exposure through trade restructuring, to improve economic structure, to promote competition and employment, and to maintain steady and sustainable economic growth.
文摘The current global financial crisis's severity is rarely seen once in a century. Due to a lack of liquidity-attracting new industries, the economic adjustment might be prolonged; and the multiplier effects of international finance and international trade call for joint rescue plans on a global basis. China's recent price adjustment has proven a failure and its domestic consumption-stimulating policy is ineffective. Investments and exports remain the growth engine for China's economy. So the country should make efforts to maintain export competitiveness with output adjustment, restoration of interest rate parity and reduction of the tax rate parity. Internationalization of the U.S. dollar-permeated renminbi is not a sensible choice, as the renminbi is not, in essence, an international currency, and it lacks a micro-foundation.
文摘Most of the economists agree that renminbi is undervalued, while as for how much it should be appreciated, substantial disagreements exists. At the beginning of this year, analysts abroad tended to think that the renminbi should increase its value by 10% to 15%. The most recent estimates are that the renminbi should appreciate 20% to 30%. This shows the great upward pressure on the renminbi. Since it was devalued in 1994, China’s currency has been kept at a constant nominal level to the US dollar despite china’s rapid economic growth, rising productivity, strong exports, and massive foreign direct investments——all factors that normally cause a currency to appreciated, moreover, the resulting build-up of central bank foreign reserves in itself is sufficient to justify renminbi appreciation. The reasons for keeping Renminbi stable is discussed in this paper.
文摘A global renminbi(RMB)needs to be backed by a large,deep and liquid RMB market with a world-class Chinese government bond(CGB)market as its core.It also needs the support from a bigger and more open domestic stock market.China’s CGB market is the sixth largest local currency sovereign bond market in the world.By transforming the non-tradable,captive central bank liabilities into homogeneous and tradable CGBs through cutting the still high Chinese reserve requirements by 1/3,the size of the CGB market can rise by 40%,boosting market liquidity while trimming distortions to the banking system.Also,policy bank bonds may attract foreign investor demand.Finally,a bigger and more open domestic A-share stock market also helps expand the RMB assets in the international investor portfolio.With both bigger bond and stock markets and their higher foreign ownerships following market opening,the combined sum of Chinese domestic bonds and A-shares held by foreign investors may increase five folds during 2018–2025,lifting the RMB asset position in global investor portfolios,facilitating a potential global RMB,while promoting a deeper and more efficient Chinese domestic capital market.This process of liberalising cross-border portfolio capital flows for non-resident investors may bring both risks and benefits to the Chinese economy.
文摘This paper is a tentative endeavor to delineate the potential of the renminbi to become a global currency. It first analyzes the critical economic, financial and policy attributes that are required to support a currency to gain an international role. It then examines whether China has the potential to acquire these attributes. The paper concludes by offering some provisional observations on the implications for Asia and the global economy, should the renminbi evolve into a world currency in the coming decades.
文摘This study reviews the developments in markets. The onshore market has seen a the onshore and offshore renminbi derivatives rapid build-up in the market infrastructure and price discovery mechanism in the past year, with empirical evidence suggesting that its pricing is increasingly determined by financial fundamentals, such as the covered interest rate parity. However, the growth of the market has been restrained by restrictions on the participant base, limited variations in the RMB/US$ exchange rate, market participants＇ lack of technical capacity and experience, and inadequate supporting financial market infrastructure. The non-deliverable forward （NDF） market, concentrated in Hong Kong and Singapore, is more developed, but has the drawback that its pricing is not tied to financial fundamentals. The comparison between onshore and offshore markets suggests that two issues are of particular importance for future derivatives market development in China： the balance between regulation and development, and the relationship between onshore and offshore markets.
文摘Most studies of renminbi internationalization focus on the supply side, by examining China＇s own economic and political conditions. In contrast, this study addresses the demand side of renminbi internationah＇zation, by providing an in-depth analysis of renminbi use in ordinary foreign economies from both economic and political perspectives, with a particular focus on South Korea, China＇s next-door neighbor. The study finds that sustainable indigenous market forces facilitating renminbi use in South Korea remain weak, despite the country＇s close economic ties with China. This research also shows, however, that the Korean Government has itself recently been able, through its policy measures, to generate new domestic support for greater use of the renminbi. These findings ultimately highlight the significant impact on the internationalization of a currency of the politics in the foreign countries using it.
文摘Since the financial crisis hit in 2007, the US dollar privilege has not only become ＂exorbitant＂ but ＂extortianate. ＂ Countries such as China are no longer willing to allow the USA to exercise this extortionate behavior. The potential geopolitical implications of a US dollar decline are immense. The USA would lose its privileged seigniorage position and with that the ability to achieve permanently higher returns on foreign assets than the returns paid to foreigners who invest in the USA. The global economy is already close to operating with three regional exchange rate anchors： the US dollar; the euro; and, increasingly, the renminbi. Hence, the transition to a tripolar system could occur sooner than many assert. Nevertheless, given the importance of financial deepening and integration in the internationalization of currencies, any shift will still be gradual.
文摘This paper studies the ongoing diffusion of renminbi (RMB) trading across the globe, the first of such research of an international currency. It analyses the distribution in offshore RMB trading in 2013 and 2016 using comprehensive data from the Triennial Central Bank Survey of foreign exchange markets. In 2013, Asian centers favored by the policy of RMB internationalization had disproportionate shares in global RMB trading. Over the following three years, RMB trading seemed to converge to the spatial pattern of all currencies, with a half-life of seven to eight years. The previously most traded emerging market currency, the Mexican peso, shows a similar pattern, although it is converging to the global norm more slowly. Three other emerging market currencies show a qualitatively similar evolution in the geography of their offshore trading. Overall, the RMB's internationalization is tracing an arc from the influence of administrative measures to the working of market forces.
基金The authors thank Ashley Esarey, Gordon Houlden, Jeffrey Sachs, Wing Thye Woo, Yingfeng Xu and two anonymous reviewers for helpful comments and suggestions. Cheng Li is also grateful to the staff at China Institute, University of Alberta for excellent research assistance. Financial support from China Scholarship Council （Grant No. 201404920002） and from National Natural Science Foundation of China （Grant No. 71603275） is gratefully acknowledged.
文摘In the present paper we explore the internationalization of the renminbi with reference to the experiences of other monetary powers, and discuss its determinants, prospects and implications for China＇s development in the ＂new normal. ＂ Specifically, after summarizing the major progress made thus far, we conduct a regression analysis, showing that economic size and financial conditions are significant determinants of the international currency status, while inertia and other unobserved factors also play important roles. These empirical findings enable us to undertake a scenario analysis focusing on the renminbi＇s potential to become a global reserve currency. Based on this quantitative research, we then revisit China＇s policy initiatives designed to promote its currency overseas. In our view, the internationalization of the renminbi, along with financial deepening and liberalization, should be regarded as a means to achieve China ＇s goal of reaching a more sustainable and balanced model of development.
